Tax evasion on lawful income: is it a form of money laundering?

Deen Kemsley, Sean A. Kemsley and Frank T. Morgan

Journal of Financial Crime, 2023, vol. 31, issue 1, 33-43

Abstract: Purpose - The purpose of this study is to determine whether income tax evasion also constitutes money laundering if Financial Action Task Force (FATF) Recommendations are strictly applied, including cases where an offender evades tax on lawful income. Design/methodology/approach - Apply FATF conditions for money laundering to the tax evasion facts inUnited States v. Walter Anderson. In this case, the USA alleges that Anderson attempted to evade $200m of taxes on lawful income. Findings - Anderson’s tax evasion actions met all the FATF’s conditions for money laundering. FATF Recommendations imply that tax evasion, even on lawful income, is a form of money laundering. Tax evasion produces criminal tax savings and simultaneously launders those criminal proceeds. Practical implications - The FATF effectively classified all tax evasion as money laundering when it designated tax evasion among predicate offenses thereto. The FATF stopped short of explicitly stating this result. The FATF should seriously consider taking the next step: formally recognize tax evasion as one form of money laundering, and thus codify a single crime that covers both offenses. A single-crime approach may be unfamiliar to prosecutors, but it could enable a more effective multiagency approach to fighting financial crime. It could simplify prosecution, eliminate overlapping statutes and reduce concerns over double jeopardy. Originality/value - To the best of the authors’ knowledge, this is the first tax case analysis to indicate that tax evasion completely incorporates money laundering within the FATF framework.

Keywords: Taxation; Tax evasion; Money laundering (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfcpps:jfc-11-2022-0268

DOI: 10.1108/JFC-11-2022-0268

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